High Court: Owners of commercial premises in Cork awarded €45k for damage caused by former tenant

The owners of a commercial property in Cork city have been awarded €45,614 for damage caused by a former tenant who converted the ground floor of the property from an off-licence to a bar without their consent.

Soon after the works were carried out, tenants on the first floor of the property complained that the floor had subsided, and the ground floor tenant ultimately abandoned his lease with significant arrears.

Finding that the tenant had breached the terms of his contract, Mr Justice Michael Quinn dismissed the tenant’s €145k counterclaim for property he had left in the building.

Background

The plaintiffs (Richard Walsh, Morgan O’Brien, Declan Field, and David Brady) are businessmen who own a building at No. 56 MacCurtain Street, Cork.

In April 2005, the plaintiffs purchased the long leasehold interest in the building for €1.5 million. In June 2006, they leased the ground floor of the building to the defendant, Joe Kearney, for a term of 25 years. The plaintiffs agreed to transfer the Seven-Day Publican’s Licence attached to the ground floor to Mr Kearney, and agreed that he could convert the Bar into an off licence/wine shop which he was planning to open, to be known as the Naked Grape.

In early 2007 the plaintiffs learned that Mr Kearney had undertaken further works to the ground floor. The effect of the works was to convert the premises back into a bar – which included a reconfiguration of the layout of the ground floor, the removal of a kitchen at the rear to make space for a seating and music area, the removal of fire exit corridors, and the relocation of toilet areas.

In early 2008, a firm of architects, whose offices were on the first floor of the building, complained that the floor had subsided. This caused the plaintiffs to investigate the matter and engage an engineer to survey the building and identify remedial works required.

By October 2009, Mr Kearney had fallen in to rental arrears and the plaintiff commenced ejectment proceedings in the Circuit Court. By the time the ejectment proceedings were commenced, Mr Kearney was in arrears of rent to the extent of €27,118. By this point, Mr Kearney had permitted a third party, Dave Hanlon, to operate a bar from the premises and claimed that it was Mr Hanlon who was responsible for the arrears. However, the plaintiffs did not grant consent to any assignment of the lease.

In December 2009, the plaintiffs effected a peaceable re-entry. They found the ground floor abandoned, the electricity discontinued, and rates and water rates unpaid. Furthermore, the Seven-Day Publican’s Licence had expired.

High Court

The plaintiffs commenced the present proceedings in January 2012, seeking damages in respect of repairs and loss of rental income. The plaintiffs claimed that the condition of the building when they re-entered in 2009 was such as to necessitate extensive repair works, and that this was caused by alterations made by the defendant to the ground floor without their prior consent.

The plaintiffs initially sought €83,879, however, this was revised downwards to €63,928 to reflect allowances for rent and rates.

Counterclaiming against the plaintiffs, Mr Kearney claimed that he had prior consent to undertake the work complained of. He originally claimed that the value of his property on the premises at the time of the plaintiffs’ re-entry, and which was not returned to him, totalled €149,437 (however this was revised at the hearing). Mr Kearney also counterclaimed for the sum of €201,000.00 in respect of costs of refurbishing the premises by works which he says were made with the consent of the plaintiffs (however, this element of his counterclaim was not pursued at the hearing).

Mr Justice Michael Quinn said it was “common case that consent was not given in writing, such as would comply with the provisions of clause 3.12 of the lease”. On the evidence, Mr Justice Quinn said that even if one of the plaintiffs had indicated to Mr Kearney that an application for consent “would be considered”, no such consent was ever given.

In those circumstances, the works carried out to convert the building back into a bar in 2007 were in breach of clause 3.12 of the lease.

Mr Justice Quinn added that “[t]o the extent that there could have remained any doubt as to the exact cause of the floor settlement, the defendant at the very least placed himself in a position where a failure to obtain consent to the 2007 works, in clear breach of Clause 3.12, exposed him to the risk of liability for the consequences of the state of the building after the works”.

Considering the particulars of the plaintiffs claim, Mr Justice Quinn accepted that a majority of the costs should be allowed in full. However, considering the loss of rental income from December 2009 to May 2010 (totalling €32,470), Mr Justice Quinn accepted Mr Kearney’s submission that the works could have been completed earlier, and that the property could have been marketed earlier. In those circumstances, Mr Justice Quinn allowed half of the sum claimed under this heading.

In total, Mr Justice Quinn allowed a total of €45,614.22 in respect of the particulars of damage, and ordered Mr Kearny to pay this sum to the plaintiffs for beach of contract.

Dismissing the counterclaim, Mr Justice Quinn noted that there was some confusion as to whether the contents of the bar were owned by Mr Kearney or by third parties. Mr Justice Quinn added that, if Mr Kearney had not abandoned the premises and had made an “orderly departure”, arrangements could have been made for the removal of his property from the premises.